S markets are closed today for Martin Luther King Day and as is often the case when the US is closed, stocks and commodities are trading up slightly in light action. That being said, today’s trading could see traders set up for what looks to be a busy week.
The last two weeks saw heavy pressure on markets culminating in Friday’s big rush for the door with traders looking to get out before the US long weekend. On a regular weekend after a Friday crunch, one would expect to see another shakeout on the Monday after people consider their holdings over the weekend. While we saw this pattern play out overseas overnight, it’s possible that the US holiday could delay a selling climax to tonight or tomorrow.
This week could also see significant activity in the market as a number of developments that traders have been concerned about move from the rumour to the news phase.
As had been widely expected, the US and EU lifted many of their sanctions from Iran over the weekend, allowing it to return to the world oil market. Iran is expected to start exporting 0.5 mmbbl/d in short order and add another 0.5 mmbbl/d over the next several months. Following an initial slide, WTI and Brent have been bouncing back today, although they still need to retake $30.00 to confirm an upturn.
This morning OPEC raised its 2016 oil demand forecast slightly which could be a mixed blessing. Although improved demand could help to sop up the oversupply out there in the market, it also gives producers less incentive to co-operate on stabilizing the supply side.
This brings China GDP, retail sales and other announcements which may indicate if all the hubbub about China since the start of the year and the steep market dives were warranted or not. Over the weekend Chinese Premier Li indicated the country’s GDP grew about 7% last year, even with or slightly above street expectations depending on who you talk to. Chinese indices had been acting to start the year like people were expecting an imminent collapse of the country’s economy. If the economy doesn’t fall apart, shares could bounce back.
Already overnight, some of the fears out there appear to be easing. CNY along with mainland indices moved back up while defensive havens like gold and JPY stopped rising and started to drop back once again.
With the US closed today, North American trading may focus more on Canada with lots for traders to focus on, with the oil and gas sector likely to attract particular attention. The end of the Suncor Energy / Canadian Oil Sands takeover battle with a friendly deal announcement along with a bouncing oil price could spark significant moves in the sector.
The loonie has also been active again overnight, rebounding against USD and other currencies. What’s particularly interesting is that CAD is really outperforming other oil currencies like NOK and RUB. CAD had been particularly depressed last week on speculation the Bank of Canada could cut interest rates on Wednesday, perhaps this has changed. Trading in CAD could remain active through the central bank decision on Wednesday at 10:00 am EST.
Canadian Oil Sands has agreed to be acquired by Suncor energy in a friendly transaction bringing the recent hostile takeover war to an end. Suncor has raised its offer to 0.28 of its shares for each COS share, making this a $6.6B deal including $2.4B of debt.
Significant announcements released overnight include:
OPEC raised its 2016 global oil demand growth forecast to 1.26 mmbbl/d from 1.25 mmbbl/d
UK Rightmove house prices 6.5% vs previous 7.4%
Australia TD inflation 2.0% vs previous 1.8%
Japan industrial production 1.7% vs street 1.6%
Singapore electronic exports (0.3%) vs street (5.9%)
Upcoming significant announcements include:
8:00 am EST Poland consumer prices street 0.2%
8:00 pm EST China direct investment street 3.1%
9:00 pm EST China GDP over quarter street 1.8%
9:00 pm EST China GDP over year street 6.9%
9:00 pm EST China retail sales street 11.3%
9:00 pm EST China industrial production street 6.0%
9:00 pm EST China fixed assets street 6.1%
9:30 pm EST China Bloomberg monthly GDP previous 6.85%
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